(2) In subsection (7) (profits of a company for an accounting period to include foreign income dividends) the words "and with the addition of foreign income dividends arising to the company" shall cease to have effect.

(3) Subsection (8A) (definition of "foreign income dividends") shall cease to have effect.

(4) This paragraph has effect for accounting periods beginning on or after 6th April 1999.

(a) in subsection (2)(a), the words "a foreign income distribution" shall cease to have effect;

(b) in subsection (3)-

(i) for the formula there shall be substituted the following formula-

U =

A x C D

(ii) the definition of "B" shall cease to have effect; and

(c) subsection (4) shall cease to have effect.

(7) Section 468R of the Taxes Act 1988 (foreign income distribution to corporate holder) shall cease to have effect.

(8) Sub-paragraphs (1)(a), (5) and (6) above have effect for distribution periods beginning on or after 6th April 1999.

(9) Sub-paragraphs (1)(b), (2) to (4) and (7) above have effect for distribution periods the distribution date for which falls on or after 6th April 1999.

Section 490 of the Taxes Act 1988

9. - (1) Section 490 of the Taxes Act 1988 (companies carrying on a mutual business or not carrying on a business) shall be amended as follows.

(2) In subsection (1) (which contains a reference to foreign income dividends) the words "or out of foreign income dividends" shall cease to have effect.

(3) In subsection (4) (which contains a reference to foreign income dividends) the words "or foreign income dividends" shall cease to have effect.

(4) Subsection (5) (definition of "foreign income dividends") shall cease to have effect.

(5) This paragraph has effect in relation to distributions made on or after 6th April 1999.

Section 687 of the Taxes Act 1988

10. - (1) In section 687 of the Taxes Act 1988 (payments under discretionary trusts) in subsection (3), paragraph (aaa) (which concerns any sums treated under section 246D(4) as income of trustees) shall cease to have effect.

(2) This paragraph has effect in relation to distributions made on or after 6th April 1999.

Section 689B of the Taxes Act 1988

11. - (1) In section 689B of the Taxes Act 1988 (order in which expenses to be set against income) in subsection (2)(b) the words "246D(4) or" shall cease to have effect.

(2) This paragraph has effect in relation to distributions made on or after 6th April 1999.

Section 699A of the Taxes Act 1988

12. - (1) In section 699A of the Taxes Act 1988 (untaxed sums comprised in the income of the estate)-

(a) in subsection (1)(a), and

(b) in subsection (4)(a),

the word "246D(3)" shall cease to have effect.

(2) This paragraph has effect in relation to distributions made on or after 6th April 1999.

(2) This paragraph has effect in relation to distributions made on or after 6th April 1999.

Section 731 of the Taxes Act 1988

14. - (1) Section 731 of the Taxes Act 1988 (application and interpretation of sections 732 to 734) shall be amended as follows.

(2) In subsection (9A) (application of references to interest in relation to a qualifying distribution other than a foreign income dividend) the words "other than a foreign income dividend" shall cease to have effect.

(3) Subsections (9B) to (9D) (which make provision in relation to foreign income dividends) shall cease to have effect.

(4) This paragraph has effect in relation to distributions made on or after 6th April 1999.

(a) in sub-paragraph (1), the words "and foreign income dividends", and

(b) in sub-paragraph (3), the words "or foreign income dividend",

shall cease to have effect.

(6) Paragraphs 3A and 3B (which make provision in relation to international headquarters companies paying foreign income dividends) shall cease to have effect.

(7) In paragraph 4 (receipt of franked investment income after payment of advance corporation tax) in sub-paragraph (2) the words "or paid any foreign income dividends" shall cease to have effect.

(8) Paragraph 4A (receipt of foreign income dividends after payment of advance corporation tax) shall cease to have effect.

(9) Paragraph 6A (claims for set-off in respect of foreign income dividends received by a company) shall cease to have effect.

(10) In paragraph 7 (qualifying distributions which are not payments and payments of uncertain nature) in sub-paragraph (3) the words "and no foreign income dividend is paid" shall cease to have effect.

(2) In subsection (2), paragraph (c) (which provides for Case I profits to be reduced by the shareholders' share of any foreign income dividends from investments held in connection with life assurance business) shall cease to have effect.

(4) Sub-paragraphs (2) and (3) above have effect in relation to distributions made on or after 6th April 1999.

Transitional provisions

22. - (1) Where, in the case of an accounting period of a company beginning before 6th April 1999 and ending on or after 5th April 1999 ("a transitional period"), there would (apart from this sub-paragraph) be such an excess as is mentioned in section 246F(3) of the Taxes Act 1988, no such excess shall be deemed to have arisen.

(2) In their application in relation to foreign income dividends paid in an accounting period of a company beginning before 6th April 1999, sections 246J(5) and 246K(10) of the Taxes Act 1988 shall have effect as if the reference to any subsequent accounting period-

(a) included an accounting period which immediately follows a transitional period, but

(b) did not include any later accounting period.

23. Where a foreign income dividend paid by a company before 6th April 1999-

(a) is received by a person on or after that date, and

(b) is not one in relation to which section 246D of the Taxes Act 1988 applies,

the recipient shall be treated, for all purposes of the Tax Acts, as receiving instead a qualifying distribution made by a company resident in the United Kingdom of an amount equal to nine tenths of the amount of the foreign income dividend.